Stock Market Update

[BRIEFING.COM] Stocks are under pressure today amid a mix of higher oil prices, firmer inflation readings, and a backup in Treasury yields, all of which are weighing on growth stocks that have led the recent move to record highs. The S&P 500 (-1.0%), Nasdaq Composite (-2.0%), and DJIA (-0.3%) are all lower just after midday, while the Russell 2000 (-2.4%) and S&P Mid Cap 400 (-1.6%) underperform, reflecting the broader risk-off tone.

The April CPI (0.6%; Briefing.com consensus 0.6%) and Core CPI (0.4%; Briefing.com consensus 0.4%) readings were in line with month-over-month expectations, but showed an increase in the year-over-year rates (3.6% for headline CPI and 2.8% for core CPI) that remain well above the Fed’s 2.0% target. Combined with the jump in oil prices (WTI crude is currently up $3.71, or 3.8%, to $101.78 per barrel), the data is reinforcing concerns that inflation progress is stalling, pushing out rate-cut expectations and adding pressure to growth and tech stocks.

Treasuries are reflecting that shift, with the 2-year note yield up five basis points to 4.00% and the 10-year note yield up five basis points to 4.46%.

To be fair, tech stocks, and in particular, semiconductors, were due for a pullback after an impressive rally that pushed the S&P 500 and Nasdaq Composite to record highs in recent sessions. The PHLX Semiconductor Index is down 6.6% today, though it remains 7.4% higher for the month of May and roughly 60% higher on a year-to-date basis.

Recent outperformers, including Qualcomm (QCOM 202.66, -34.88, -14.68%), Sandisk (SNDK 1373.51, -174.05, -11.25%), and Intel (INTC 115.01, -14.43, -11.15%), are among the worst-performing S&P 500 components today. The broader information technology sector (-2.8%) holds the widest loss as a result.

However, it is not the only S&P 500 sector under considerable pressure.

Losses are widening in the consumer discretionary sector (-1.8%) as it too faces weak mega-cap leadership from Tesla (TSLA 422.70, -22.30, -5.01%) and Amazon (AMZN 263.11, -5.88, -2.19%). The Vanguard Mega Cap Growth ETF is now down 1.2%.

Additionally, oil-sensitive stocks such as cruise lines and rate-sensitive stocks such as homebuilders are underperforming amid today’s macro backdrop.

Elsewhere, the industrials sector (-1.2%) faces pressure as electrical equipment names, which surged alongside semiconductors in recent sessions, pull back, while the materials sector (-0.9%) holds a similar loss.

There is some rotational interest into more defensive holdings, with the health care (+2.4%) and consumer staples (+2.2%) sectors outperforming.

Though not a defensive sector itself, investors are also doing some bargain hunting in the financials sector (+0.7%), which remains this year’s worst-performing sector.

Additionally, the energy sector (+0.8%) advances amid the surge in oil prices. Developments around the U.S.-Iran conflict have been relatively muted today, though President Trump is reportedly considering resuming military actions as negotiations stall.

Overall, today’s action reflects a notable cooling in risk appetite following the market’s recent sprint to record highs, with rising yields and renewed inflation concerns driving profit-taking across many of the market’s recent leaders.

• April NFIB Small Business Optimism 95.9 (Briefing.com consensus 96.1); Prior 95.8
• April CPI 0.6% (Briefing.com consensus 0.6%); Prior 0.9%, April Core CPI 0.4% (Briefing.com consensus 0.4%); Prior 0.2%
• • The key takeaway from the report is the elevated inflation readings, which are well above the Fed's 2.0% inflation target and a signal not to expect a rate cut anytime soon.